The U.S.S. Enterprise receives an emergency transmission from a science station on the planet Ventax II. The Ventaxians are in a panic, convinced a mythic figure called Ardra has returned to fulfill a thousand-year-old contract. According to legend, she promised the citizens of the once war-torn planet a thousand years of peace and prosperity in exchange for their enslavement at the end of that time. When Picard takes Worf, Data and Troi to the planet to help Jared, the Ventaxian leader, Ardra suddenly appears before them.

Ardra tells Jared she has come to collect on the bargain, and expresses an immediate attraction to Picard. The Captain refuses to be intimidated by her, even when she demonstrates her ability to cause tremors, disappear and frighten Worf by changing form to become the Klingon devil. He points out to the crew that the U.S.S. Enterprise has the ability to recreate all of Ardra's tricks, and dispatches Data to review the ancient scrolls that constitute the Ventaxians contract with Ardra. Data soon reports that not only is the contract valid, but that it gives Ardra title to anything orbiting the planet, including the U.S.S. Enterprise and its crew.

Back on board the U.S.S. Enterprise, Ardra suddenly materializes in the sleeping Picard's quarters and begins making romantic advances. When he refuses, she changes form in an effort to tempt him, eventually assuming Troi's form. When that too falls, she angrily transports him to Ventax while still in his pajamas, and then makes the U.S.S. Enterprise disappear.

While Geordi works to find a mechanical source to Ardra's powers, Picard stalls for time by suggesting legal arbitration of the contract. Ardra agrees, with the condition that Picard's soul be the prize should he lose. She then chooses Data to be the judge, and the hearing begins. Ardra performs her illusions to convince Data that she is the claimant named in the ancient contract. Picard points out, by questioning Jared about his planet's peace and prosperity when they initiated sweeping reforms a thousand years before. But when Ardra confronts the frightened Jared, he still maintains that she has claim to the planet.

At that moment, Geordi enters the room with news that he has located the power source. Picard is granted a recess and contracts the U.S.S. Enterprise, which Geordi was able to locate. When the hearing resumes, Picard duplicates all of Ardra's tricks and invites her to stop them. When she cannot, Picard exposes her as a con artist and Data dissolves the contract. Jared thanks Picard for saving the Ventaxians, but Picard insists they saved themselves long ago.